Softbank Said in Talks to Invest Up to $20B for Control of WeWork

Superinvestor Masayoshi Son’s SoftBank is in talks with WeWork to invest $15 billion to $20 billion in the co-working pioneer, according to sources familiar with the discussions cited in a Wall Street Journal report on Wednesday.

The US shared office provider, which has reportedly just rented 80,000 square feet (7,432 square metres) of new space in Hong Kong’s Causeway Bay, was valued at up to $40 billion in previous talks with Softbank, which is now said to be seeking control of the eight-year-old firm.

Should a deal be consummated, the investment would be Softbank’s fourth commitment to the New York-based unicorn, after the venture capital firm committed a total of approximately $6 billion over the past 15 months to WeWork’s business.

SoftBank Doubles Down on WeWork Bets

The investment of $15 billion to $20 billion would likely come from SoftBank’s Vision Fund, said people aware of the issue in the Journal account. The Saudi and Abu Dhabi-backed fund already owns nearly 20 percent of WeWork after committing just under $5 billion to the office provider’s Asia expansion through a pair of deals earlier this year and in late 2017.

In August of this year, Softbank added a $1 billion convertible note deal with WeWork, to bring its equity commitment to the company to $6 billion.

Should this latest round of discussions lead to a completed investment, SoftBank would end up owning around 50 percent of the shared office provider founded in 2010 by entrepreneurs Adam Neumann and Miguel McKelvey.

WeWork Deals with Hysan in Causeway Bay

WeWork is said to have leased space in Lee Garden One and Hysan Place

WeWork could use the new cash as the shared office provider continues to open new locations around the region and piles up financial liabilities.

On Tuesday, the co-working space operator was reported to have leased another 80,000 square metres of space in properties belonging to Hong Kong developer Hysan, in the city’s Causeway Bay area.

According to a market source cited in an account by the Hong Kong Economic Times WeWork has signed up to rent the 46th to 48th floors of Lee Garden One, amounting to a total of 48,000 square feet at HK$80 per square foot. In Hysan Place, the company is said to have leased the 31st and 32nd floors, totalling 32,000 square feet at HK$90 per square foot.

At these rates, WeWork’s new Causeway Bay deals would commit the co-working giant to leases totalling HK$80.6 million per year.

On Friday, the company is set to officially open its first Kowloon site in Sun Hung Kai Properties’ Two Harbour Square project, a space which was originally leased by naked Hub in January of this year, before the Shanghai startup was acquired by WeWork.

Big Leases Build Big Liabilities

WeWork’s Hong Kong expansion mirrors the flexible space provider’s rapid growth globally after starting as a single office in Lower Manhattan in 2010.

By mid-2018 WeWork was renting more than 265,000 desks in 287 buildings worldwide, however, the leasing commitments for spendy space, including its Hong Kong deals, leave the company with significant financial challenges.

Financial statistics revealed via a WeWork bond sale earlier this year, show that the company lost $723 million in the first half of 2018, expanding from a $154 million loss in the same period last year.